Case Studies

Fladeboe alleged that Dealer Computer Services, Inc. (DCSI) exercised monopoly power to engage in illegal tying. According to Fladeboe, starting in 1995 DCSI obligated Ford dealerships to enter contracts to purchase a Computerized Publication Display (CPD) system from DCSI in order to have the ability to purchase Ford parts and accessories. The CPD system was the first electronic catalog of Ford parts numbers on the market, and many dealers purchased it in order to supplement or replace existing microfiche and paper catalogs.

According to Fladeboe, DCSI engaged in illegal tying behavior, in which Ford parts and accessories were the tying products, and the CPD system was the tied product.

applEcon was hired by the defendant DCSI to provide expert testimony on the validity of the tying claim. Our expert report and testimony applied the definition of economic tying, as interpreted by the courts, to the specific products, markets, and alleged conduct at issue. We concluded that three of the necessary elements of an economic tie were not present, and that therefore the tying claim was invalid. First, there was no forcing: Fladeboe purchased the CPD system voluntarily, because it was a superior product; depending on the year, 20% to 35% of dealerships chose not to purchase the system at all. Second, the seller, DCSI, did not have sufficient market power in the tying product (Ford parts and accessories) to enforce a tie. Third, there was no adverse effect on competition, as alternatives to the CPD system have always been available (and the introduction of CPD increased choices available to consumers), and competing electronic catalogs have entered the market.

The case went to arbitration in April 2005, and the arbitrator issued her decision on 17 June 2005. All of Fladeboe’s claims were denied. The arbitrator awarded to DCSI the full amount of its contract damages, plus the full amount of expenses associated with the case.